Tax is one of the biggest costs for self-employed NZ tradies — and most tradies claim too little, leaving thousands of dollars with IRD that should be in their pocket.
The problem isn't that tradies are dishonest. It's that IRD's rules for what you can and can't claim aren't obvious, and most tradies don't have time to read the guidance. A busy week on the tools means receipts don't get saved, business purchases get lumped in with personal spending, and at year end the accountant works with incomplete information.
This guide covers every major deduction available to NZ self-employed tradies in 2025–26 — what qualifies, what doesn't, and how to maximise what you're entitled to claim.
The Golden Rule: Business Purpose
IRD's fundamental rule is straightforward: you can claim any expense incurred in earning your business income. If an expense is wholly for business, you claim 100%. If it's partly private (like a phone you use for both work and personal calls), you claim only the business proportion.
The record-keeping requirement: keep all receipts and invoices for 7 years. IRD allows digital copies — a photo on your phone stored in a cloud service is fine. If you're audited and can't produce a receipt, the claim may be disallowed.
Tools and Equipment
Tools are often where tradies leave the most money on the table.
Under $1,000 (ex GST) — Write Off Immediately
Any single item costing under $1,000 (excluding GST) can be claimed in full in the year of purchase. IRD calls this the low-value asset threshold.
This covers most hand tools, safety gear, small power tools, work boots, drill bits, saw blades, measuring equipment, and protective equipment. Keep all receipts — even $15 items add up over a year.
What counts as a single item: IRD looks at whether assets are functionally independent. A set of drill bits is likely one item. A full tool set might be argued as multiple items — worth asking your accountant.
Over $1,000 — Depreciate Over Time
Larger tools and equipment must be depreciated over their useful life using IRD's depreciation rates. You can't write off a $4,000 table saw in year one — you claim a percentage each year.
Common IRD depreciation rates (diminishing value):
| Asset | DV Rate |
|---|---|
| Power tools (drills, grinders, saws) | 30% |
| Ladders and scaffolding | 25% |
| Trailers | 13.5% |
| Compressors and generators | 25% |
| Computers and tablets | 48% |
| Mobile phones | 48% |
| Cameras and measuring equipment | 30% |
Use our Depreciation Calculator to calculate your exact deduction each year.
Tip: Pool your assets. If you buy multiple items of equipment throughout the year, each one under $1,000 can be written off immediately. If you're buying something just over $1,000, it's worth considering whether you genuinely need that exact item or whether a functionally equivalent item under $1,000 would do the job.
Vehicle Expenses
Your work vehicle is almost certainly your largest deductible expense. Getting this right can save you $3,000–$8,000 per year.
Mixed Private and Business Use (Most Common)
If you use your vehicle for both work and personal purposes, you can only claim the business-use proportion. IRD requires a logbook to establish this percentage.
The logbook process: - Keep a logbook for a minimum of 90 consecutive days - Record every trip: date, start/end odometer, destination, and business purpose - Calculate the business-use percentage - Apply that percentage to all vehicle running costs for that year - Reconfirm every three years (or when your usage pattern changes significantly)
Most trades vehicles that travel to job sites are 70–85% business use. At 80%, you're claiming 80% of: - Fuel and oil - Insurance and registration - WOF and warrant costs - Servicing and tyres - Loan interest (on the vehicle purchase loan) - Depreciation (20% DV for cars and utes)
Alternatively, use IRD's kilometre rates — you multiply business kilometres by the Tier 1 rate (73 cents/km for the first 14,000 business km in 2024–25, then 21 cents/km above that). This method is simpler but usually results in a smaller deduction for high-mileage tradies. Use our Vehicle Mileage Calculator to compare both methods.
Dedicated Work Vehicle
If the vehicle is used entirely for business and never taken home (stored at a yard, not your house), you can claim 100% of all running costs. In practice, the vehicle needs to genuinely not be used personally — IRD will look at whether this is plausible given your situation.
Vehicle Purchase
You cannot deduct the full purchase price of a vehicle in the year you buy it. Instead, depreciate at 20% diminishing value for cars and utes, or 30% for certain commercial vehicles.
Buying a new vehicle near year end: If you buy a $40,000 ute in March and your tax year ends March 31, you get $8,000 depreciation in year one. If you wait until April, you don't get anything for a full year. Timing large purchases before March 31 is legitimate tax planning.
Protective Clothing and Workwear
| Item | Deductible? |
|---|---|
| Steel-capped boots | ✅ 100% |
| Hi-vis vest and jacket | ✅ 100% |
| Overalls and work trousers | ✅ 100% |
| Hard hat and safety helmet | ✅ 100% |
| Branded clothing with business logo | ✅ 100% |
| Safety glasses and hearing protection | ✅ 100% |
| Regular clothes (jeans, t-shirts) worn for work | ❌ Not deductible |
| Warm thermal underlayers (not safety-specific) | ❌ Borderline — get advice |
The distinction IRD makes: occupation-specific clothing (items that have a work-specific function or are required for safety) is deductible. Conventional clothing worn for work is not, even if you only wear it on site.
Phone and Internet
If you use your mobile for business — quoting, job management, supplier calls, navigating to sites — the business-use portion is deductible. Most tradies who use their phone as a primary business tool can legitimately claim 70–85% of their mobile plan costs.
How to calculate it: - Estimate the percentage of calls and data used for business vs personal - Apply that percentage to your annual phone and data costs - Keep a sample record (a week or two of call logs) to support your estimate if audited
Internet: If you use home internet for business — sending quotes, managing invoices, ordering materials — the business proportion is deductible. A common approach is 20–30% for internet, but it depends on actual usage.
Home Office
If you genuinely use part of your home for business admin — quoting at the kitchen table doesn't count, but a dedicated desk space for business paperwork does — you can claim a proportion of home running costs.
Calculate it as: (Area used for business in m²) ÷ (Total home area in m²) × Annual home costs
Deductible home costs include: power, internet (at business proportion of that proportion), rates, insurance, mortgage interest or rent, and building depreciation.
Example: - Home: 150m², home office: 12m² = 8% business use - Annual home costs: $24,000 - Deductible home office portion: $1,920
This isn't a huge deduction for most tradies, but it's real money. Your accountant should calculate it each year.
Training and Education
Training directly related to your trade is deductible:
- Trade courses and refreshers (LBP CPD, safety tickets)
- Health and safety training (working at heights, asbestos awareness, first aid)
- Software training (Xero, Tradify, Fergus, Fastcrew)
- Industry conference attendance (registration, travel, accommodation)
- Subscriptions to trade publications and online resources
What's NOT deductible: General education that qualifies you for a new career or a fundamentally different role. A builder doing a university accounting degree is not deductible — unless they're already running a construction business that requires financial management skills, which is a grey area worth discussing with your accountant.
ACC Levies
All three ACC levies — the work levy, earners' levy, and Working Safer levy — are fully tax deductible as a business expense. Your accountant should ensure these are claimed each year. They're included in your provisional tax payments and end-of-year tax return automatically.
Insurance Premiums
Business insurance premiums are fully deductible:
- Public liability insurance — 100% deductible
- Professional indemnity insurance — 100%
- Tool and equipment insurance — 100%
- Vehicle insurance (business-use proportion)
- Income protection insurance — the portion relating to business income is deductible; the portion covering personal income is not. Get your insurer to split this or get your accountant's advice.
Life insurance premiums are generally not deductible.
Accounting, Legal, and Software Fees
- Accountant fees: 100% deductible — including fees for preparing your personal income tax return if it includes business income
- Bookkeeping: 100%
- Job management software (Tradify, Fergus, Simpro, Fastcrew): 100%
- Accounting software (Xero, MYOB): 100%
- Legal fees for business contracts and advice: 100%
- Legal fees for personal matters: Not deductible
Software subscriptions are now a major category for tradies. Between job management, accounting, invoicing, and scheduling apps, it's common to spend $1,500–$3,000 per year. Keep all subscription receipts — they're all deductible.
Interest on Business Loans
If you borrowed money for your business — to buy a vehicle, tools, or equipment — the interest portion of your repayments is deductible. The principal repayment is not (that's just repaying the loan, not a business expense).
Example: - $35,000 equipment loan at 8.5% interest - Monthly interest: approximately $248 - Annual deductible interest: approximately $2,980
Keep your loan statements to identify the interest component each year.
Subcontractor Costs
If you pay subcontractors to help on jobs, their costs are fully deductible as a business expense. Whether or not they're GST-registered affects your GST claim (you can only claim GST if their invoice includes GST), but the income tax deduction applies regardless.
Materials and Supplies Used on Jobs
All materials purchased for use on client jobs are deductible:
- Timber, steel, pipe, cable, paint — all deductible
- Consumables (sandpaper, drill bits, tape, sealants) — deductible
- Safety signage and barriers — deductible
Materials purchased but not yet used (stock on hand at year end) are technically still an asset and should be recorded as such — though for small amounts most accountants don't ask tradies to do a formal stocktake.
Common Mistakes NZ Tradies Make at Tax Time
1. Not keeping any records during the year The single biggest issue. Trying to reconstruct 12 months of expenses in April from memory doesn't work. Set up a simple system — even a folder on your phone where you photograph every receipt — and use it consistently.
2. Using a personal card for everything If business and personal expenses are mixed on one card or account, your accountant spends hours sorting them out (and charges you for it). A separate business account or business credit card makes this trivial.
3. Forgetting the vehicle logbook Without a logbook, IRD expects you to prove your business-use percentage another way — and may disallow part of the claim. Do the 90-day logbook once, keep it on file, and you're covered for three years.
4. Not claiming provisional tax instalments as expenses Provisional tax is not an expense (it's just pre-payment of your income tax). But the ACC portion included in provisional tax instalments is deductible. Your accountant should separate these.
5. Claiming personal items as business expenses Tools you bought for a home project, a holiday disguised as a site visit, furniture for your living room claimed as "home office." IRD audits construction businesses regularly. Unjustified claims with no records create far bigger problems than the deduction was worth.
Key Tax Dates for NZ Self-Employed Tradies in 2025/26
| Date | What's due |
|---|---|
| 28 Aug 2025 | Provisional tax instalment 1 (2025/26) |
| 28 Nov 2025 | GST return (Sep/Oct period) |
| 15 Jan 2026 | Provisional tax instalment 2 (2025/26) |
| 28 Jan 2026 | GST return (Nov/Dec period) |
| 28 Mar 2026 | GST return (Jan/Feb period) |
| 7 May 2026 | Provisional tax instalment 3 (2025/26) |
| 28 May 2026 | GST return (Mar/Apr period) |
| 7 Jul 2026 | IR3 income tax return (self-filers) |
| 31 Mar 2027 | IR3 with tax agent extension (2025/26 year) |
See our full NZ Tradie Tax Dates page for every deadline in detail.
Should You Use an Accountant?
Yes, for almost every self-employed tradie. A good accountant with trade business experience will:
- Find deductions you'd miss
- Calculate depreciation correctly
- Handle your GST returns
- Lodge your IR3 before the extended deadline
- Give you a heads-up before big bills are due
The cost: $800–$2,000 per year for most sole traders. The typical saving: $1,500–$5,000 in legitimate deductions found. It's nearly always worth it.
Use software like Fastcrew to keep your job costs and income organised through the year — your accountant can work from clean data instead of chasing receipts, which cuts their time and your bill.
NZ Tradie Tools provides free calculators, templates, and guides for New Zealand tradies. Download our free Vehicle Log Book template, use the Depreciation Calculator, and keep all your deduction records organised through the year. For definitive guidance, refer to ird.govt.nz or consult a registered tax agent.